RBI hikes CRR to suck out Rs 36k cr liquidity

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RBI hikes CRR by 75bps
New Delhi, Jan 29: Leaving the repo and the reverse repo rates untouched, the Reserve Bank of India (RBI) on Friday, Jan 29, hiked the Cash Reserve Ratio (CRR) by 75 basis points (bps) to 5.75 per cent.

RBI's move in its crucial Annual Monetary Policy comes in the wake of the spiraling inflation rates. The hike in CRR is expected to suck out Rs 36,000 crore liquidity from the system.

According to media reports, CRR hike will be done in two parts.

The first part of this, which will come into effect from Feb 13, will be for 50 bps while the balance 25 bps will be effective from Feb 27, 2010.

However, the repo rate, which refers to the rate at which commercial banks borrow from the RBI and the reverse repo rate, which stands for the rate at which the RBI borrows from the banks, have not been changed.

The GDP growth for financial year 2009-10 was put up at 7.5 per cent as against the 6 per cent in the previous year's projection.

The inflation in Mar 2010 is projected to be at around 8.5 per cent, the central bank said in its third quarter review.

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